Taiwan: Patent Litigation

Taiwan’s Intellectual Property and Commercial Court (IP Court) has jurisdiction over the first and second instances of patent infringement litigation. The IP Court is staffed by technical examination officers who have expertise in various fields and who have served previously as examination officers at Taiwan’s Intellectual Property Office (TIPO). The technical examination officers not only review arguments made by both parties regarding technical issues, but also provide consulting opinions to the judges.

In most cases, there are separate hearings held to examine issues of claim construction, invalidity, infringement, and damages. Typically, the parties are required to exchange briefs prior to each hearing. The IP Court reviews the technical issues (namely, validity and infringement issues) with the support of the technical examination officers. Normally, the proceedings for patent infringement litigation take one to two years to conclude at the first instance.

The final decision of the first instance in a patent infringement litigation made by one judge at the IP Court can be appealed unconditionally to a panel of three judges of the same court. The appellate decision made by this panel of three judges can in turn be appealed to the Supreme Court, provided that the value of the claim exceeds NT$ 1.5 million. It usually takes approximately one to one and a half years to conclude the proceeding at the second instance and six months to one year to conclude the proceeding at the third instance. The IP Court in some cases will issue interim decisions on specific issues, such as invalidity or infringement. Those interim decisions cannot be appealed until the IP Court issues its final decision in a patent litigation.

Taiwan’s Patent Act stipulates that anyone who manufactures, offers to sell, sells, uses, or imports patented goods will be liable for infringement. The provision regulates acts of direct infringement, such that manufacturing, offering to sell, selling, using, and or importing patented goods will be deemed direct patent infringement.

Taiwan’s Patent Act does not contain explicit provisions over indirect/contributory infringement. Theories of indirect/contributory infringement can be found, however, in Taiwan’s Civil Code. In practice, patent owners take action against indirect infringers by resorting to the joint tort theory of the Civil Code, and allege that the indirect infringers are joint tortfeasors along with the direct infringers, per the Civil Code. The elements of indirect infringement under the Civil Code include: (a) the accused person has induced others to commit direct infringement or facilitated or provided assistance to those who conduct direct infringement, (b) the accused person has a subjective intention to conduct the abovementioned acts, and (c) the direct infringer is found to be liable for patent infringement.

The scope of protection of patent claims includes the literal scope and the scope expanded under the doctrine of equivalents. The literal scope of a patent is determined based on the claims set forth in the specification. When interpreting the scope of the claims, the description and drawings of the patent may be used as references. Evidence used to interpret the scope of the claims includes both intrinsic and extrinsic evidence. Intrinsic evidence includes the claims, the description of the invention, the drawings, and the prosecution history file. Extrinsic evidence refers to the technique information previously disclosed, such as patents, books, magazines, reports, or products. The scope expanded under the doctrine of equivalents is provided to protect the interests of patentees. The scope will be expanded to cover substantially the same functions, means, and results. This expansion can prevent others from derogating a patent without changing or replacing substantial technical features set forth in the specifications. Prosecution history estoppel will also be considered when construing the scope of patent claims. When the supplement, amendment, correction, response, and or reply related to patentability narrow the scope of the claims during the process of examination of a patent application and / or maintenance, the patent owner is no longer allowed to claim the limited or excluded parts in subsequent patent infringement litigation.

At the IP Court, the key defences to the claim of patent infringement typically include “Patent invalidly”, “Non-infringement”, and “Statute of Limitations”. With the defence of “Patent invalidly”, the defendant may argue the lack of the required “Utility”, “Novelty”, and or “Non-Obviousness”. With the defence of “Non-infringement”, the defendant will argue that the disputed product does not read on the patent claims and is not applicable to the doctrine of equivalents. Finally, a patentee must bring a claim for damages within two (2) years after he or she has become aware of the damages and of the person(s) liable for said damages; and one’s claim for damages will become extinguished if it is not exercised within ten (10) years after the time of the alleged infringement, whether or not this person has become aware of the damages.

To be eligible for patent protection under Taiwan’s Patent Act, an invention must meet each of the requirements of “Utility”, “Novelty”, and “Non-Obviousness”. Patent protection will be rejected for an invention if it is not industrially applicable, or if the invention was disclosed in a printed publication or was publicly exploited or known prior to the filing of the patent application, or if the invention can be easily made by a person ordinarily skilled in the art based on prior art, the invention will not be awarded a patent. Even if the invention is patented, the granted patent right can be revoked by the patent office through an invalidation proceeding initiated by any person who challenges the validity of the patent.

An invention will be considered to lack the required novelty or non-obviousness if it constitutes part of a prior art or if someone of ordinary skill in the relevant field could easily make the invention based on prior art. When considering the novelty requirement, prior art that was disclosed in a domestic or foreign patent specification or drawings that are not part of the invention for which the application was filed, but which has become publicly known or used technology, will be cited by the examiners as grounds to reject the application. Also, if an invention claimed in a patent application is identical to an invention disclosed in the description, claims, or drawings of an earlier-filed patent application for an invention, which is laid open or published after the filing of the later-filed patent application, the invention will also be considered to lack novelty in order to comply with the first-to-file principle. Except for the first invention of the pioneer in a particular field, most patents are inventions that are cumulative of prior art. As such, the patent office/court must avoid hindsight doubts as to when an invention is or is not obvious in light of prior art evidence. Usually, several factors will be taken into account, such as “unexpected technical effect”, “solving long-standing problems”, “overcoming technical prejudice” and “obtaining commercial success” when determining whether an invention is non-obvious. There are also some secondary considerations under TIPO’s “Examination Guidelines” as well as scholarly opinions, such as, for instance, if an invention leads to the patentee’s commercial success.

Under Taiwan’s patent practice, a patentee is allowed to amend a patent that is in the midst of patent litigation. In practice, a patentee can seek to amend a patent whenever necessary without the limitation of time, as long as the patent is valid and has not yet been conclusively revoked. However, a patentee who would like to amend a granted patent can only delete claims, narrow the scope of claims, correct errors or translation errors, or clarify ambiguous statements. Except for the correction of translation errors, an amendment cannot go beyond the scope of content disclosed in the description, claims, or drawings as filed, or substantially enlarge or alter the scope of the claims as published. TIPO examiners will review the amendment and determine whether the same is allowable. At the same time, in a patent infringement litigation, if a patentee amends the patented claims that were used by the patentee to assert the infringement, the IP Court will consider whether the amendment is allowable in the event that the defendant disputes the amendment.

Because of the characteristic of a pharmaceutical or agrichemical invention patent, Taiwan’s Patent Act regulates the system of patent term extensions for these kinds of patents. The Patent Act stipulates that where regulatory approval must be obtained in accordance with other laws and regulations for the exploitation of a pharmaceutical or agrichemical invention patent or the manufacturing process thereof, if such regulatory approval is obtained after the publication of the relevant invention patent, the patentee may apply for one and only one extension for the patent term of said invention patent based on the first regulatory approval. Said regulatory approval can be used only once to seek a patent term extension. There are also some restrictions on patent term extensions. The extension period cannot exceed the length of time during which the patent cannot be exercised due to the filing of a request for the regulatory approval with the central competent authorities in charge of the relevant industry. If the time needed to obtain said regulatory approval exceeds five (5) years, the granted patent term extension will be five (5) years. For an object that is applicable to the extension, the above-said term, “pharmaceutical”, does not include any veterinary drug. Furthermore, when requesting a patent term extension, the request form and supporting documents must be submitted to TIPO within three (3) months after obtaining the first regulatory approval, and the request for patent term extension will not be granted if the application is not filed within six (6) months prior to the expiry of the original patent term.

In most cases, IP Court judges will consider technical matters primarily by themselves, but, with the help of technical examination officers. IP Court judges will not refer a technical issue to an independent institute unless said technical issue is extremely complicated and requires the expertise of an independent institute. Both parties in some cases are allowed to present expert witness testimony to establish technical facts.

Discovery does not exist in Taiwan’s litigation. A patentee is permitted to obtain from the court a compulsory evidence collection order to compel the infringing party to produce materials in possession of the infringing party and which are essential to the patent litigation. The patentee may also request courts to compel a third party to produce materials if said materials are in the possession of this third party and are necessary for the patentee to establish its case. The patentee may request a compulsory evidence collection order before the commencement of and during a patent litigation proceeding.

Taiwan’s Patent Law does not provide procedures specifically to assist the holder of a process patent to determine infringement. An order for compulsory evidence collection, as discussed above, is the only measure available for the holder of a process patent for the purpose of collecting evidence.

Under Taiwan IP law practice, a protective order is available for those materials that contain trade secrets of a party to a patent litigation or of a third party. The IP Court will issue a protective order only if the moving party has established the necessity that certain materials be disclosed in the patent infringement proceeding, but, said materials contain trade secrets of the moving party or of a third party. The IP Court will usually grant a protective order upon a request of the attorneys for the party who will have access to those confidential materials. Upon being subject to a protective order, one is prohibited from disclosing the protected materials to anyone who is not subject to the same order. Violations will result in criminal liability.

Anyone who challenges the validity of a granted patent can initiate at TIPO an invalidation action against said patent. TIPO examiners will consider arguments by the party bringing this invalidation action and also arguments made by the patentee in response to the invalidation action. The examiner will issue a ruling on the invalidation action. Any party who disagrees with TIPO’s ruling can file an appeal to the appeal review board of TIPO’s supervising agency. Any party who disagrees with the ruling made by the appeal review board can bring an administrative lawsuit at the IP Court to seek proper remedies. Meanwhile, defendants in patent infringement litigation usually raise an invalidity defence. Under Taiwan IP practice, the IP Court in a patent infringement proceeding will determine the validity issue on its own and will not stay the proceeding and or wait for TIPO’s ruling on the invalidation action. The IP Court’s decision on the validity issue merely binds the parties of the patent infringement litigation, and has no effect on anyone other than the parties to the patent infringement litigation. In a situation where the IP Court holds that a patent is invalid, the IP Court will dismiss the patentee’s infringement litigation on the grounds that the patentee is not able to enforce said patent. In this situation, as long as TIPO is not a party to the proceeding, TIPO will have to rule on the invalidation action independently; in other words, the IP Court’s invalidty decision in a patent infringement proceeding does not bind TIPO. In practice, however, TIPO will issue its ruling on an invalidation proceeding after the IP Court issues its decision in a patent infringement proceeding, and TIPO will follow the IP Court’s opinion in respect of the validity issue. As such, the IP Court’s decision on the validity issue has a de facto binding effect upon TIPO.

For the first instance of a patent infringement proceeding, the IP Court enjoys nonexclusive jurisdiction. In other words, a patentee may still initiate a patent infringement proceeding before a district court with proper jurisdiction over the parties/subject matter. In practice, however, virtually all patentees will choose the IP Court as the forum for patent infringement litigation, as the IP Court is a specialized court, and is better equipped with technical examination officers. The IP Court has exclusive jurisdiction over patent infringement litigation at the second instance. As such, the IP Court is the only forum that plays an influential role in patent litigation. Although a patentee could also request the tariff authority (Customs) to prohibit goods allegedly infringing a patent from being imported into Taiwan, this mechanism is rarely used by patentees, and barely has any influence on Taiwan’s patent practice.

As long as the subject matter of a proceeding involves a Taiwan patent or other intellectual property right, the IP Court will have jurisdiction over this proceeding, unless some extreme exception is present. If a patentee goes to a district court in the common court system and files a patent infringement proceeding, then the district court will determine whether it has jurisdiction over this proceeding based on (1) whether the defendant resides in the territory that is subject to this district court’s jurisdiction and (2) whether the infringing acts or damages occur in the territory subject to this district court’s jurisdiction. For a proceeding where at least one of the parties is a foreign national or a foreign company, the courts (both the IP Court and the district courts) will have to determine whether Taiwan courts have proper jurisdiction over the proceeding. Usually, as long as the patentee asserts that a Taiwan patent is being infringed, the courts will determine that the Taiwan courts have jurisdiction over the proceeding.

After a patentee files an infringement claim with the IP Court, the IP Court will hold a non-mandatory mediation hearing, inviting both parties to explore the possibility of settling the matter outside of the court. Nonetheless, most cases are not settled at this stage, and instead go further to the next stage. Taiwan’s arbitration law does not preclude patent disputes from being resolved by arbitration. In practice, however, arbitration is rarely used to resolve patent disputes.

A patentee must in the complaint state precisely which products being sold/manufactured by the defendant(s) infringe the patentee’s patent, together with a claim chart, illustrating how the products read on the specific claims that the patentee will assert in the proceeding. For the infringing products, the patentee must specifically indicate in the complaint the product numbers or other information that is able to identify the products. A rough description of the infringing products will not be accepted. Taiwan’s patent law does not set forth any stipulations specifically imposing upon patentees any limitation periods for commencing a patent infringement proceeding. For those patentees who seek damages remedies, the statute of limitations requires them to initiate litigation within two years after they become aware of the infringing activities.

A patentee and an exclusive licensee will have standing to bring a patent infringement action. A non-exclusive licensee will also have standing to bring a patent infringement action, provided that the non-exclusive licensee files the patent infringement action jointly with the patentee.

For an invalidation action brought on the grounds that a patent does not satisfy the requirements (utility, novelty, and non-obvious), or that an amendment to a patent is not allowable, anyone is allowed to bring such an invalidation action and such plaintiff is not required to establish any connection with the patentee or the patent. On the other hand, for an invalidation action based on the grounds that the holder of a patent is not a legitimate applicant (for instance, the patentee is not an inventor or the employer of the inventor/s), only a person or an entity having a legitimate interest in the patent has standing to file such an invalidation action against said patent.

Interim injunctions, known as “preliminary injunctions” in Taiwan, are available in patent litigation proceedings. Courts will grant a preliminary injunction only in an extremely exceptional situation where the party moving for the preliminary injunction has established that the party will suffer irreparable harm due to the injuring acts and that a preliminary injunction is thus indeed necessary for the purpose of preventing material harm or imminent danger or other similar circumstances. The court will consider four elements when determining whether to issue a preliminary injunction: (a) the possibility that applicant might succeed in its underlying claim; (b) whether the court’s preliminary injunction might cause irreparable damage to either party; (c) the degree of potential damage to both parties; and (d) the impact that the preliminary injunction might have on the public interests. For example, the impact on the public interests will be key to the court’s consideration when determining whether to issue a preliminary injunction against pharmaceutical products because said injunction might have a significant impact on human health or on the treatment of diseases. According to the IP Court’s records, the rate at which preliminary injunctions are granted in cases in relation to patents and other intellectual property rights is approximately 39.17% (from 2008 to June 2019), and of the 120 applications, 47 were approved. Under Taiwan’s IP practice, before the IP Court issues a preliminary injunction, the IP Court will require the infringing party to file a brief response to arguments made by the moving party. Hearings may be held by the IP Court if necessary. A preliminary injunction could be enforced directly by the moving party after the court issues the same, whether or not the infringing party appeals said preliminary injunction order. In other words, the moving parties do not need to wait for a preliminary injunction to become conclusive and finalized. In cases where the IP Court grants preliminary injunctions, the IP Court often requests the moving party to post a bond that could be used to compensate the allegedly infringing party’s potential loss due to enforcement of the preliminary injunction in the event that the preliminary injunction is subsequently set aside by the appellate courts.

Typically, a patentee will sue in a patent infringement proceeding for a permanent injunction that prohibits the infringing party from manufacturing/selling the infringing products, as well as for an award of damages. The IP Court will grant these two types of remedies if the patentee successfully establishes the infringement and the damages.

A damage award will be granted by the IP Court if the patentee has established the infringement and the damages. The amount of said damage award may be calculated in accordance with the measures set forth by the Patent Act, including (1) actual damages and lost profits; (2) the difference in the patentee’s profits before and after the infringing activities; (3) profits gained by infringers; and (4) reasonable royalties. An enhanced damages award is available if the infringement has been found to be committed wilfully. In such situation, the court can grant an enhanced damages award of the amount greater than the actual damages; the amount of said enhanced damages award cannot exceed three times the actual damages.

When the patentee establishes the infringement, i.e., the fact that the infringing products fall within the scope of the asserted claims, the IP Court will usually grant a permanent injunction that prohibits the defendant from continuing any infringing activities, which injunction may include an order for destruction of the infringing things or the materials or implements used in the infringing act, or an order for other necessary disposal.

In a situation where a party denies the patent infringement allegation made by a patentee, said party is allowed to seek declaratory relief from the IP Court, to declare that the party does not infringe the patent asserted by the patent holder. In a proceeding such as this, the moving party must not only establish non-infringement, but must also have “immediate legal interests” in demanding such judgment. In other words, the moving party must persuade the IP Court to find a compelling interest that the moving party does need a court ruling to confirm its non-infringement.

For the plaintiff, the costs incurred at the first instance include court fees, attorney fees, and any expenses necessary to establish the plaintiff’s case, such as the costs for testing the materials by an independent institute. If the plaintiff is a foreign company without a registered presence in Taiwan, the defendant may request the court to order the plaintiff to post a bond that covers the court fees for the second and third instances. For the defendant, the cost at the first instance is primarily the attorney fees. At the appellate level, the party who appeals against the lower court’s ruling must cover the court fees.

The successful party in a patent litigation usually can only recover court fees and litigation expenses that are necessary for the litigation. However, under the Code of Civil Procedure, attorney fees at the third and final instance, which are limited to less than 3% of the value of the claims and the maximum amount cannot exceed NT$ 500,000, can be included as litigation expenses and must be paid by the party who lost the litigation. Moreover, there are provisional remedies proceedings under the Code of Civil Procedure that enable parties to obtain security for costs.

One of the largest patent litigation growth areas in Taiwan in terms of industry sector is the biotechnology industry, including the pharmaceutical industry. This reflects the policy direction that the Taiwan Government has actively promoted in recent years. As the industry continues to grow, increasingly more new drugs and new medical materials enter the markets, both local and global. Many international biotech companies have also developed patent portfolios in Taiwan. In addition, the patent linkage system in Taiwan came into effect on 20 August 2019, and protein drugs (biosimilar) are also included. The main effects include the stay of the marketing approval for 12 months and marketing exclusivity for the first generic drug applicant for 12 months. This situation has led to an expanding number of patent litigation disputes related to pharmaceuticals in Taiwan.

Calculation of damage awards has always been one of the most important issues in patent litigation. The amount of damages awarded has considerable impact on patentees’ incentives to enforce their patents in the courts. In recent years, the IP Court in some high-profile cases has granted enhanced damages awards. Since 2012, in response to the patent/royalty stacking circumstances in the modern technology society, more and more patent litigation judgments have referred to the concept of patent contribution rate. The patent contribution rate is the recognition of a patent’s value in the market, and this value is possessed by the patentee. In recent judgments of the IP Court, opinions on whether and how the patent contribution rate is to be applied are not completely consistent. However, the IP Court currently tends to comprehensively consider the overall contribution of patents to the infringing products and assesses rates therefrom. Thus, it is foreseeable that the patent contribution rate in patent litigation will be a very contentious issue in Taiwan over the next twelve months.

In addition, design patent has triggered public attention because of some high-profile rulings by the IP Court against Taiwanese local manufacturers of vehicle parts. Advocacy for a statutory exemption that frees vehicle part manufactures from patent infringement liabilities has made some arguments; opponents of said exemption also made some counterarguments. Close monitor of this issue will be important for patent practitioners in Taiwan.

From a substantive perspective, the amounts of monetary remedies granted by the IP Court are relatively low, and attorney fees and the costs incurred from collecting and investigating the infringement cannot be included in the damage compensation. This demonstrates the undervaluation of the patent. In addition, the patent invalidity ratio determined in infringement litigation is also slightly higher than that in other countries, which is a critical issue that Taiwan needs to consider. Procedurally, there is a provision allowing plaintiffs to obtain compulsory evidence collection orders, a court order that compels defendants to produce materials that are in possession of the defendant but which are necessary for the plaintiff to establish its case. However, there are still cases in which the courts dismiss plaintiffs’ motions for said orders. Reasons given by the IP Court for its denials of said orders include the desire to avoid abuse of the proceedings, to prevent an undue impact on the stock price of the alleged infringer, and to avoid unwanted disclosure of an alleged infringer’s trade secrets. In order to determine whether these reasons are legitimate grounds upon which the IP Court can base its denials, it is necessary to carefully reconsider the evidence collection mechanism in Taiwan.

In addition, Taiwan is now considering restructuring its patent invalidation proceedings. Proposals that amend the Patent Act have been pending for further examination of the legislature.

Taiwan’s innovations in energy, developments of industrial clusters, and Research and Design expenditures amount of the proportion of GDP are among the best in the world, and are even ranked second in patent applications. These represent Taiwan’s greatest opportunities for continued growth in the international patent system. However, Taiwan is also facing many challenges, such as international cases of theft of patent technology, trade secrets, and talent. Therefore, while actively developing a patent portfolio, it is necessary to prevent the interests of enterprises from being infringed. This may be the most difficult challenge in the international patent system for Taiwan.